The Governor of the Bank of Ghana (BoG) Dr Ernest Addison has said the current Act that governs the operations of the central bank needs clarification.
For example, he said there is the issue of an emergency that needs to be properly defined.
What do you call an emergency? He asked and further indicated that “Let us define it very carefully and make clear the conditions under which the rules can be breached.”
Answering a question as to why the Act is being revised instead of an entirely new one being introduced, when he was addressing the 112th Monetary Policy Committee (MPC) press conference in Accra on Monday, May 22, he said “If you look at the current Act, remember they tried to improve it in 2016, but there are still inconsistencies and difficulties with implementation. First is the issue of when you talk about 5% limit.
“Is it the stock measurement because at any time, the central bank has claims on the government from 20 years ago; so is it that we have a stock limit of 5% of the previous year’s revenue or is it the flow starting from a particular period of time and how are you going to assess that flow, relative to the previous year’s revenue of 5%.
“So there are measurement issues there that need to be clarified. What do you call an emergency, let’s define it very carefully and to make it clear the conditions under which the rules can be breached. The procedural issues and law are not very clear.
“Who does the reporting to Parliament, is it the Governor or the Minister of Finance, all of these issues need to be clarified in the law. In any case, most of the reporting is done through the Minister of Finance. The Governor doesn’t really have direct obligation to Parliament. For me it is not very clear.
“So all of these issues have to be properly clarified in the law and I believe that there is a need to do that. But even if you had the most perfect law, what happened in 2022, would not have been different because the choice of either to grind the economy to a halt or allow government operations to come to a standstill, which is worse than the problem itself. So the issue of the law is fine, but when you’re in an economic crisis, things have to be done differently.”
The International Monetary Fund (IMF) had indicated that the Bank of Ghana Act would be revised.
This is to, among other things strengthen the independence and mitigate fiscal dominance by the government.
The Fund said the amendments to the Act would lead to mechanisms to monitor and enforce compliance, and a clear definition of emergency situations under which the limit can be temporarily lifted.
“Pending legislative changes, the BoG and the Ministry of Finance signed an MoU (prior action) to eliminate monetary financing during the programme. An ongoing updated Safeguards Assessment will provide additional support for designing changes to the BoG Act” the FInd said in is report on Ghana.